Nomura Holdings Inc ADR (NMR)

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Nomura Holdings, Inc. (NMR)

F2Q13 Earnings Call

October 29, 2012 5:30 AM ET

Executives

Atsushi Yoshikawa – Group COO; and CEO, Wholesale Division

Junko Nakagawa – CFO

Analysts

Masao Muraki – Deutsche Securities

Tsujino-san – JP Morgan

Tanaka-san – Goldman Sachs

Sasaki-san – Mitsubishi UFJ Morgan Stanley

Jun Shiota – Daiwa Securities

Mitsumasa Okamoto – Merrill Lynch Japan Securities

Presentation

Operator

Good day, everyone, and welcome to today’s Nomura Holdings Second Quarter Operating Results for Fiscal Year Ending March 2013 Conference Call. Please be reminded that today’s conference call is being recorded at the request of the hosting company. Should you have any objections, you may disconnect at this point in time. During the presentation, all the telephone lines are placed for a listen-only mode. The questions-and-answer session would be held after the presentation.

Please note that this telephone conference contains certain forward-looking statements and other projected results which involve known and unknown risks, delays, uncertainties and other factors not under the company’s control which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections.

Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security evaluation, competitive conditions and size, number and timing of transactions.

With that, we like to begin the conference. Mr. Atsushi Yoshikawa, please go ahead.

Atsushi Yoshikawa

This is Atsushi Yoshikawa, Group COO. Thank you for joining us for Nomura Holdings’ second quarter earnings call. Some of you from the U.S. are joining from early in the morning, and I also understand there is a huge Hurricane Sandy approaching the New York area. So please take care and stay safe.

Today, I will first say a few words before handing over to our CFO, Junko Nakagawa, to give you an overview of our financial results. After that, we will take your questions.

At the Investor Day on September 6, we announced our management targets for March 2016, the year of our 90th anniversary, and a series of measures for our wholesale business. Since then, I have had the opportunity to speak to many stakeholders, and I would like to thank you all for your encouragement and your valuable feedback.

The earnings environment remains challenging for global financial institutions. The most pressing issue for Nomura is to lower our breakeven point in Wholesale to deliver stable earnings without relying on a market recovery. At the same time, we need to understand the diverse needs of our clients, further enhance cross-border and cross-divisional collaboration and provide high value-added solutions.

In our second quarter results, which we are about to run you through, Retail and Asset Management continued to deliver stable earnings. And within Wholesale, Fixed Income made a solid contribution to revenues in each region. In addition, in Investment Banking, closer collaboration across regions and divisions in our focus sectors of FIG, Financial Sponsors, Retail/Consumer and Resources/Energy led to a number of cross-border mandates and we gained further traction during the quarter.

On the other hand, the equities market remained challenging with subdued market activity and lower liquidity on major markets. However, since announcing our Fit for the Future plan, we have communicated closely with our clients regarding our new business model to consolidate our execution services into Instinet. While there are slight differences by region, on the whole, we believe investors are starting to understand our strategy.

With that, I will now hand you over to our CFO, Junko Nakagawa, to run through the highlights of our Q2 results.

Junko Nakagawa

Nakagawa speaking, CFO. I will now give you an overview of our financial results for the second quarter of the fiscal year ending March 2013. Please turn to page three of the document titled Consolidated Results of Operations.

Net revenue for the second quarter was ¥401.7 billion, an increase of 9% compared to the last quarter. Pre-tax income was ¥35.4 billion and net income ¥2.8 billion, representing quarter-on-quarter increase of 80% and 49% respectively. This was our fourth straight quarter of profits.

Pre-tax income for our three business segments totaled ¥15.7 billion and all business divisions were profitable. Despite the challenging environment, Retail and Asset Management remained resilient, contributing to firm-wide earnings.

Wholesale returned to profitability on higher revenues in the Americas, EMEA and Japan, driven by Fixed Income. This more than offset an increasing expenses of approximately ¥6 billion related to a reduction in head count.

For the first half of the fiscal year, net revenue was ¥770.9 billion, up 22% over the same period last year. Pre-tax income was ¥55.1 billion and net income ¥4.7 billion. As such, we returned to profit on half-yearly basis compared to the losses in the previous year first six months.

Page four gives you an overview of the results and page five business segment results. Total income before income taxes from the three businesses segment was as previously mentioned, ¥15.7 billion for Q2 and for the first half ¥24.7 billion. In the second quarter, we also reported ¥12.4 billion unrealized gain on investments in equity securities held for operating purposes, which includes unrealized gains from unlisted equities.

Now, overview of each business segment, please turn to pages six and seven for Retail. The market environment in Retail remained challenging in the second quarter with subdued investor risk appetite. Net revenue declined 2% from the prior quarter to ¥80.8 billion. Pre-tax income declined 10% to ¥11 billion. Sales of bonds slowed due to the low rate environment, but investment trust sales are resilient compared to the overall market. Retail revenues were also supported by stock sales related to large primary offerings.

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